(From Business Intelligence Briefs/Armada Corporate Intelligence) The assertion made by President Barack Obama on exporting was correct but politically charged, and now the real battle has been engaged: U.S. businesses do indeed need to expand the export economy to pull out of the slow economic recovery.
Growth markets are no longer in the United States for some of the key products made domestically and, for the past several years, the nation has seen a steady increase in export activity that has gone a long way towards offsetting the declines in other sectors. This is part of what prompted the president to call for a doubling of exports in the next year, but it is increasingly evident that this is a pledge that will be exceptionally hard to make good on. Moreover, it's one that Obama failed to coordinate with the Democrats and supporters in the labor unions.
In general, the labor unions oppose international trade. This is not the case in all situations as there are some unions that have members who are involved in global trade activities. However, the majority of the unions see trade as more of a threat than a benefit. The advance of imports generally means that jobs are lost here as consumers substitute the foreign goods for the domestic versions. There are other issues of concern as unions here object to the way that workers are treated in other nations, and worries also exist regarding safety and quality when it comes to some imported goods. These concerns are legitimate in many respects as it is abundantly clear that imports do displace domestic goods and domestic jobs. The balance that has to be struck falls somewhere between the need to provide jobs for the domestic worker and the need to provide consumers with affordable goods and services.
This sets up the challenge for Obama. On the one hand, he understands that the United States makes money by selling its goods and services overseas and such activity creates jobs and profits for domestic workers and companies. However, just selling to the rest of the world is not an option. -- The rest of the world wants to sell to U.S. consumers as well, making every trade agreement a compromise in which some markets are opened to each nation.
Analysis: The White House has tried to bring the unions towards supporting some of the new trade agreements by promising to demand enforcement of international labor standards. This is the offer that has been made to bring the unions to support the US-South Korea Trade Agreement. Still, there is no sign that this has won over the union leaders. Given the strength of the unions in South Korea it is hard to see what the US would be demanding - they already have the ability to shut down the system with general strikes and have done so many times. Further, half of the leaders in the ruling party are there as a result of the support they get from the unions, making South Korea hardly an anti-union.
The real issue for the unions is that Korea stands to gain access to the very American markets unions want to protect: the automotive sector, manufacturing and electronics. The agreement opens Korea to financial services, insurance and telecoms - none of which are heavily unionized industries in the United States. It is going to be very hard for the Obama White House to get approval for this treaty in an election year, and it is very likely that Obama will have to attend the next G-20 meeting in Seoul empty-handed.
Chris Kuehl, NACM Economic Advisor